The next Steve Jobs: Ex-head of hardware engineering at Apple now Palm CEO

Steve Jobs must have gone nuts hearing that rival Palm appointed Apple’s ex-hardware whiz Jon Rubinstein its new CEO and here’s why. Struggling smartphone maker Palm appointed Wednesday Apple’s ex-iPod and hardware chief Jon Rubinstein their new chief executive officer, just two days after the company successfully rolled out the new Pre handset. Analysts view the news as the logical advancement of Rubinstein’s executive chairman role at Palm. Jon Rubinstein, affectionately called Ruby, will replace Ed Colligan who served as Palm CEO over the past 16 years, but Rubinstein will also retain his existing chairman position. Leading Palm’s product-development efforts will remain a part of his CEO duties, just like Apple CEO Steve Jobs oversees the creation of new gizmos.

Rubinstein, master in electrical engineering, joined Palm in October 2007 as executive chairman of the board. During his near two-year tenure at Palm, he has been leading the company’s research, development, and engineering, having worked closely with Jeff Hawkins, the company’s founder and technology chief responsible for coming up with the first PDA and smartphone that brought Palm fame and fortune, like the original Palm Pilot or Treo and Centro phones. Many think that Rubinstein has been instrumental in resurrecting the company often identified with innovations in the mobile space.

Rubinstein’s early days

Prior to joining Palm, Rubinstein served as Apple’s vice president of hardware engineering where he oversaw the engineering and manufacturing of many Mac models, including the iMac and later G4 and G5 PowerMacs.

Rubinstein’s career in electrical engineering took off during his early gigs at Hewlett-Packard and Ardent Computer Corp, having progressed further in early 1990 when Steve Jobs offered Rubinstein the opportunity to lead a team of engineers tasked with creating the NeXT RISC workstation that never got past the assembly line due to a change of strategy that favored a software-only approach.

After NeXT, Rubinstein started a new company called Power House Systems, later acquired by Motorola. It wasn’t until Jobs offered the talented engineer the executive position at Apple in 1997 that he rose to stardom.

Days of Apple glory and abrupt resignation

Being one of the highest-ranked Apple executives, Rubinstein enjoyed Steve Jobs’ utmost respect. Because he joined Apple during difficult times, Rubinstein first overhauled the company’s engineering teams, product roadmaps and manufacturing processes. A year later he led the rapid rollout of the iMac, a machine that became a commercial success and saved Apple from oblivion. It’s a little known fact that he was responsible for ditching the floppy disk drive in iMac and equipping the machine with the then little used USB interface.

Rubinstein spotted 1.8-inch Toshiba drives with no market. Thus, the iPod was born.

This was enough to convince the Apple CEO of Rubinstein’s engineering talent and organizational skills so the CEO charged Rubinstein with the creation of the original iPod music player on an eight-month timetable.

In fact, it was Rubinstein who first brought to Jobs’ attention the fact that Toshiba had a pile of then state-of-the-art 1.8-inch hard drives that no vendor at the time saw fit to put in a product. He spotted this on a routine visit to Toshiba. Success of the iPod prompted Apple to spin off the iPod division that was entirely led by Rubinstein who reported directly to Jobs. Rubinstein is also credited with conceiving the so-called “iPod ecosystem,” a secondary market of third-party iPod accessories that generates $1 billion annually.

Apple announced that Rubinstein would retire in April of 2006, providing little information on such an abrupt resignation. At the same time, the company appointed Timothy Cook its chief of operations. Cook is now interim CEO, covering for Jobs during his medical leave of absence scheduled to end by the end of June. This executive reshuffling led many to suspect a power struggle between Cook and Rubinstein resulted in the latter leaving Apple. It’s rumored that Jobs siding with Cook was the seed of recent bad blood between Apple and its former executive now in charge of Palm.

Early retirement that wasn’t meant to be

Whatever the case, Rubinstein didn’t resign to enjoy early retirement, as both Apple and Rubinstein suggested at the time. On the contrary, a number of high-ranked executives left Apple too in order to join Rubinstein in his Palm adventure. For example, Apple’s finance chief Paul Anderson, Roger McNamee and another executive all left the Cupertino-based Mac maker amid the backdating stock options scandal, only to join Palm’s board of directors soon thereafter, where U2’s Bono Vox also has a seat.

In exchange, Palm sold a 25 percent stake to Elevation Partners to secure a much-needed cash injection of $325 million from the company that was the key to keeping the company afloat. An important thing to note here is that Bono Vox, Fred Anderson, and Roger McNamee are all partners in Elevation Partners. In addition, Ed Colligan, Palm’s Rubinstein-replaced CEO, will also be joining Elevation Partners, the company confirmed via a press release.

Simply put, ex-Apple execs led by Rubinstein have left Apple to form an investment firm which provided much needed cash that saved Palm from oblivion, earning them all a stake and voting rights at Palm. Some also think, Apple included, that deep knowledge of Apple’s inner workings and secrets that deflected executives brought with them has now enabled Palm to create the smartphone that could pose the biggest long-term threat to the iPhone.

Bad blood brews

Soon after Rubinstein joined Palm and the company announced a carefully plotted restructuring plan, the first signs of bad blood between former colleagues started showing. Rubinstein first hit a nerve by over-confidently claiming last year that existing iPhone users would all switch to Pre come June 2009, when their original two-year service contracts expire. In addition, the company’s adamant stance that Pre features pinch zoom gestures provoked Apple’s leadership to threaten the company with a potentially risky lawsuit.

Following the successful Pre launch, Rubinstein as Palm CEO may become Steve Jobs of smartphones.

Apple executives told investors during an earnings call that the company would “protect its intellectual property vigorously.” As if that wasn’t enough, Palm confirmed that Pre leverages iTunes to sync users’ media simply by fooling the jukebox software to think the smartphone is an iPod. Some analysts think the move is a huge risk since Apple could prevent this in a future iTunes update. To date, Apple has not made the move in regard to Pre’s use of iTunes or multi-touch pinch gestures that the company claims their own.

Palm has reported $90.6 million in total revenues in the third quarter of fiscal year 2009, ended February 27, 2009. Smartphone revenue was $77.5 million, down 72 percent from a year ago, while smartphone sell-through fell to 482,000 units, down 42 percent year over year.

While the company’s new flagship Pre smartphone is viewed by many as the most serious threat to Apple’s iPhone, Palm views it as the product that should turn its fortunes around and put Palm on the smartphone map again.